Brent oil, page-4

Phil Flynn last night:

The Energy Report 02/26/19
The Power of the Tweet


President Trump is proving once again the power of the tweet. Oil prices that were on the rise because of economic optimism surrounding U.S. China trade talks and OPEC production cuts, not to mention the rising tensions in Venezuela, got slammed after President Trump decided to tweet about oil. “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike - fragile!”


The Tweet immediately caused oil and products to retreat as the market remembers how the President got OPEC to do his bidding in the past, but it is the President that should really chill out because it is unlikely that OPEC would listen to him. OPEC and U.S. oil producers are still trying to recover from that last tweet engineered oil price crash that not only brought down oil but the whole stock market along with it. By granting waivers to Iran’s oil buyers, it caught not only OPEC producers by surprise, but it also caught U.S. shale producers off guard. This time OPEC will not listen to the tweet...

...One producer emailed me about the President’s tweet saying “In addition to the trouble it causes shale producers, it is also very difficult for little “stripper well” companies across the middle of the country. We are struggling to maintain employees, service debt, and have anything left over for capital expenditures in order to maintain our production levels.“

... in the U.S. shale patch, what it means is that shale oil drillers must drill more wells to keep production moving higher. Instead of just drill, drill, drill, they will have to keep drilling and drilling to offset the declines. To do that, shale operators will need a steady stream of cash and really cannot afford to see an oil price crash.

For example, let us look at the most prolific shale production area in the Permian basin. In the EIA’s last drilling productivity report it showed that new production in the region increased by 292,000 barrels a day. That is awesome, but the decline rate had you losing 249,000 barrels for a net gain of 43,000. Very impressive gain yet as production declines accelerate, it will still take intensive drilling to keep production moving higher. It’s not that the producer doesn’t have the technical ability to do that, they do, but it is going to take a lot of cash. Shale decline rates are faster than that of traditional projects so you can’t stop drilling and adding wells, or the production will continue to fall.

In other words, the best thing for U.S. energy producers are solid strong oil prices...

Phil
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US shalers continue to pump at record levels only to service debt, depleting fields faster than necessary to the benefit only of the loan sharks they have sold their soul to. It’s still a Ponzi Scheme, always has been, always will be. It can’t end well. By contrast, I know a fully cashed up Australian Oiler with a partner worth $23b who can afford what they drill. Janet Yellen ran an interview this week stating Trump didn’t comprehend the Fed’s remit or very much about the economy at all. Well, the POTUS doesn’t understand his own oil market either, let alone global oil market dynamics, which he cannot influence. It remains under the exclusive control of an oil cartel of the most despotic, undemocratic, self-serving regimes history has ever imposed on mankind, led by the House of Saud whose only goals are looking after #1 for self-preservation.

CC